Schedule 14A Information
Proxy Statement Pursuant to Section 14(a)
of the Securities Act of 1934
Filed by Registrant [ X ]
Filed by a Party other than Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or
ss. 240.14a-12
Carey Diversified LLC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement) Michael B. Pollack
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii),
14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee Computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state how it was
determined:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[letterhead-CAREY DIVERSIFIED]
[GRAPHIC-CAREY DIVERSIFIED LOGO]
April 28, 1998
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 9, 1998
The Annual Meeting of the Shareholders of Carey Diversified LLC will be
held at The Waldorf~Astoria, 301 Park Avenue, New York, New York on June 9, 1998
at 10:00 a.m. for the following purposes:
1. To elect three (3) Class I Directors, each to hold office for a three
year term and until their respective successors are elected and
qualified.
2. To transact such other business as may properly come before the meeting.
The Directors have fixed the close of business on April 20, 1998 as the
record date for the Shares entitled to vote at the meeting. If you are present
at the meeting, you may vote in person even though you have previously delivered
your proxy.
By Order of the Board of Directors
/s/H. Augustus Carey
--------------------
H. Augustus Carey
Secretary
WHETHER OR NOT YOU ATTEND THE ANNUAL MEETING, IT IS IMPORTANT THAT YOUR SHARES
BE REPRESENTED AND VOTED AT THE MEETING. SHAREHOLDERS OF RECORD CAN VOTE THEIR
SHARES BY USING THE TELEPHONE. INSTRUCTIONS FOR USING THIS SERVICE ARE SET FORTH
ON THE ENCLOSED PROXY. YOU MAY ALSO VOTE YOUR SHARES BY MARKING YOUR VOTES ON
THE ENCLOSED PROXY, SIGNING AND DATING IT AND MAILING IT IN THE BUSINESS REPLY
ENVELOPE PROVIDED. SHAREHOLDERS WHO ARE PRESENT AT THE MEETING MAY WITHDRAW
THEIR PROXY AND VOTE IN PERSON.
Carey Diversified LLC, 50 Rockefeller Plaza, New York, NY 10020 212-492-1100
Fax 212-977-3022
CDC
Listed
NYSE
The New York Stock Exchange
<PAGE>
CAREY DIVERSIFIED LLC
PROXY STATEMENT
April 28, 1998
The enclosed proxy is solicited by the Directors of Carey Diversified LLC
(the "Company") for use at the Annual Meeting of Shareholders to be held at The
Waldorf~Astoria, 301 Park Avenue, New York, New York at 10:00 a.m. on Tuesday,
June 9, 1998 (the "Annual Meeting"). The proxy may be revoked at any time prior
to voting thereof by notifying the persons named in the proxy of intention to
revoke, by execution and delivery of a later dated proxy (including a proxy by
telephone) or by appearing at the Annual Meeting and voting in person the
limited liability company interests ("Shares") to which the proxy relates.
Shares represented by executed proxies will be voted, unless a different
specification is indicated therein, for election as Directors of the persons
named therein.
The Proxy Statement and the enclosed proxy were mailed on April 28, 1998 to
Shareholders of record at the close of business on April 20, 1998 (the "Record
Date").
Alternatively, in lieu of returning signed proxies, Shareholders of record
on the Record date can vote their Shares by calling a specially designated
telephone number set forth on the enclosed proxy.
The holders of a majority of the Shares entitled to vote present at the
Annual Meeting in person or represented by proxies will constitute a quorum for
the transaction of business. The affirmative vote of a plurality of the Shares
whose holders constitute a quorum is required to elect Directors. At the close
of business on the Record Date, the Company had 24,302,955 Shares outstanding
and entitled to vote. Each Share has one vote on all matters including those to
be acted upon at the Annual Meeting.
The mailing address of the Company is 50 Rockefeller Plaza, New York, New
York 10020. Notices of revocation of proxies should be mailed to that address.
ELECTION OF DIRECTORS
The Company has a classified Board of Directors currently consisting of
three Class I Directors, three Class II Directors, and four Class III Directors,
who will serve until the Annual Meetings of Stockholders to be held in 1998,
1999 and 2000, respectively, and until their respective successors are duly
elected and qualified. Directors in a class are elected for a term of three
years to succeed the Directors in such class whose terms expire at such annual
meeting.
Nominees for election as Class I Directors are Steven M. Berzin, Gordon F.
DuGan and Reginald Winssinger. If elected, the nominees will serve as Directors
until the Company's Annual Meeting of Stockholders in 2001, and until their
successors are elected and qualified. Unless otherwise specified, proxies
solicited hereby will be voted for the election of the named nominees, except
that in the event any of those named should not continue to be available for
election, discretionary authority may be exercised to vote for a substitute. No
circumstances are presently known that would render any nominee named herein
unavailable. All of the nominees are now members of the Board of Directors.
<PAGE>
The information below sets forth for each member of the Board of Directors,
including each Class I nominee to be elected at the Meeting, such person's age,
their principal occupations during the past five years or more, and
directorships of each in public companies in addition to the Company:
CLASS I: DIRECTOR NOMINEES TO SERVE UNTIL THE YEAR 2001
Steven M. Berzin, age 47, Vice Chairman and Chief Legal Officer of the
Company, was elected Executive Vice President, Chief Financial Officer, Chief
Legal Officer and a Managing Director of W. P. Carey & Co., Inc. ("W. P. Carey &
Co.") in July 1997. From 1993 to 1997, Mr. Berzin was Vice President--Business
Development of General Electric Capital Corporation in the office of the
Executive Vice President and, more recently, in the office of the President,
where he was responsible for business development activities and acquisitions.
From 1985 to 1992, Mr. Berzin held various positions with Financial Guaranty
Insurance Company, the last two being Managing Director, Corporate Development,
and Senior Vice President and Chief Financial Officer. Mr. Berzin was associated
with the law firm of
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<PAGE>
Cravath, Swaine & Moore from 1978 to 1985 and from 1976 to 1977, he served as
law clerk to the Honorable Anthony M. Kennedy, then a United States Circuit
Judge. Mr. Berzin received a B.A. and M.A. in Applied Mathematics from Harvard
University, a B.A. in Jurisprudence and an M.A. from Oxford University and a
J.D. from Harvard Law School.
Gordon F. DuGan, age 31, President and Chief Acquisitions Officer of the
Company, was elected Executive Vice President and a Managing Director of W. P.
Carey & Co. in June 1997. Mr. DuGan rejoined W. P. Carey & Co. as Deputy Head of
Acquisitions in February 1997. Mr. DuGan was until September 1995 a Senior Vice
President in the Acquisitions Department of W. P. Carey & Co. Mr. DuGan joined
W. P. Carey & Co. as Assistant to the Chairman in May 1988, after graduating
from the Wharton School at the University of Pennsylvania where he concentrated
in Finance. From October 1995 until February 1997, Mr. DuGan was Chief Financial
Officer of Superconducting Core Technologies, Inc., a Colorado-based wireless
communications equipment manufacturer.
Reginald Winssinger, age 55, was elected to the Board of Directors of the
Company in 1998 and is currently Chairman of the Board and Director of Horizon
Real Estate Group, Inc. and National Portfolio, Inc. Mr. Winssinger has managed
portfolios of diversified real estate assets exceeding $500 million throughout
the United States for more than 20 years. Mr. Winssinger is active in the
planning and development of major land parcels and has developed 20 commercial
properties. Mr. Winssinger is a native of Belgium with more than 25 years of
real estate practice, including 10 years based in Brussels, overseeing
appraisals, construction and management. Mr. Winssinger holds a B.S. in
Geography from the University of California at Berkeley and received a degree in
Appraisal and Survey in Belgium. Mr. Winssinger presently serves as Honorary
Belgium Consul to the State of Arizona, a position he has held since 1991.
CLASS II: CONTINUING DIRECTORS SERVING UNTIL THE YEAR 1999
Francis J. Carey, age 72, was elected in 1997 as Chairman, Chief Executive
Officer and a Director of the Company. From 1987 to 1997, Mr. Carey held various
positions with affiliates of the Company, including President of W. P. Carey &
Co., and President and Director of CPA(R):10, CIP(TM) and CPA(R):12. Mr. Carey
also served as Director of W. P. Carey & Co. from its founding in 1973 until
1997. Prior to 1987, he was senior partner in Philadelphia, head of the real
estate department nationally and a member of the executive committee of the
Pittsburgh-based firm of Reed Smith Shaw & McClay LLP, counsel for W. P. Carey &
Co. and the Company. He served as a member of the executive committee and Board
of Managers of the Western Savings Bank of Philadelphia from 1972 until its
takeover by another bank in 1982, and is a former chairman of the Real Property,
Probate and Trust Section of the Pennsylvania Bar Association. Mr. Carey served
as a member of the Board of Overseers of the School of Arts and Sciences at the
University of Pennsylvania from 1983 to 1990. He has also served as a member of
the Board of Trustees and executive committee of the Investment Program
Association since 1990 and on the Business Advisory Council of the Business
Council for the United Nations since 1994. He holds A.B. and J.D. degrees from
the University of Pennsylvania and completed executive programs in corporate
finance and accounting at Stanford University Graduate School of Business and
the Wharton School of the University of Pennsylvania. Mr. Carey is the father of
H. Augustus Carey and the brother of William P. Carey.
<PAGE>
Eberhard Faber, IV, age 61, was elected to the Board of Directors of the
Company in 1998 and is currently a Director of PNC Bank, N.A., Chairman of the
Board and Director of the newspaper Citizens Voice, a Director of Ertley's
Motorworld, Inc., Chairman of the Board of Kings College and a Director of
Geisinger Wyoming Valley Hospital. Mr. Faber served as Chairman and Chief
Executive Officer of Eberhard Faber, Inc., from 1973 to 1987. Mr. Faber also
served as the Director of the Philadelphia Federal Reserve Bank, including
service as the Chairman of its Budget and Operations Committee from 1980 to
1986. Mr. Faber has served on the boards of several companies, including First
Eastern Bank from 1980 to 1994.
Barclay G. Jones, III, age 37, was elected to the Board of Directors of the
Company in 1998 and is Vice Chairman and a Managing Director of W. P. Carey &
Co. Mr. Jones joined W. P. Carey & Co. as Assistant to the President in July
1982, after his graduation from the Wharton School of the University of
Pennsylvania where he majored in Finance and Economics. Mr. Jones has served as
a Director of W. P. Carey & Co. since April 1992 and as a Director of the
Wharton School Club of New York. Mr. Jones is a director of CIP(TM) and
CPA(R):14.
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<PAGE>
CLASS III: CONTINUING DIRECTORS SERVING UNTIL THE YEAR 2000
William P. Carey, age 67, Chairman, President and Chief Executive Officer
of W. P. Carey & Co., has been active in lease financing since 1959 and a
specialist in net leasing of corporate real estate property since 1964. Before
founding W. P. Carey & Co., in 1973, he served as Chairman of the Executive
committee of Hubbard, Westervelt & Mottelay (now Merrill Lynch Hubbard), head of
Real Estate and Equipment Financing at Loeb Rhoades & Co. (now Lehman Brothers),
head of Real Estate and Private Placements, Director of Corporate Finance and
Vice Chairman of the Investment Banking Board of duPont Glore Forgan Inc. A
graduate of the University of Pennsylvania's Wharton School of Finance, Mr.
Carey is a Governor of the National Association of Real Estate Investment Trusts
(NAREIT) and a Trustee of The John Hopkins University and of other educational
and philanthropic institutions. He has served for many years on the Visiting
Committee to the Economics Department of the University of Pennsylvania and
co-founded with Dr. Lawrence R. Klein the Economics Research Institute at the
University. Mr. Carey also serves as Chairman of the Board and Chief Executive
Officer of CPA(R):10, CIP(TM), CPA(R):12 and CPA(R):14. Mr. Carey is the brother
of Francis J. Carey and the uncle of H. Augustus Carey.
Dr. Lawrence R. Klein, age 77, was elected to the Board of Directors of the
Company in 1998 and is Benjamin Franklin Professor Emeritus of Economics and
Finance at the University of Pennsylvania and its Wharton School, having joined
the faculty of the University in 1958. He is a holder of earned degrees from the
University of California at Berkeley and the Massachusetts Institute of
Technology and has been awarded the Alfred Nobel Memorial Prize in Economic
Sciences, as well as a number of honorary degrees. Founder of Wharton
Econometric Forecasting Associates, Inc., Dr. Klein has been counselor to
various corporations, governments and government agencies, including the Federal
Reserve Board and the President's Council for Economic Advisers. Dr. Klein
joined W. P. Carey & Co. in 1984 as Chairman of the Economic Policy Committee
and as a Director.
Charles C. Townsend, Jr., age 70, was elected to the Board of Directors of
the Company in 1998 and currently is an Advisory Director of Morgan Stanley &
Co., having held such position since 1979. Mr. Townsend was a Partner and a
Managing Director of Morgan Stanley & Co. from 1963 to 1978 and served as
Chairman of Morgan Stanley Realty Corporation from 1977 to 1982. Mr. Townsend
holds a B.S.E.E. from Princeton University and an M.B.A. from Harvard
University. Mr.
Townsend serves as Director of CIP(TM) and CPA(R):14.
Donald E. Nickelson, age 65, was elected to the Board of Directors of the
Company in 1998 and is currently Vice-Chairman and Director of Harbour Group
Industries Inc., a leveraged buy-out firm. From 1988 to 1990, he served as
President of PaineWebber Group, Inc., an investment banking and brokerage firm.
He is also Chairman of the Board of OmniQuip International, Inc., Del Industries
and Rapid Rack Industries. He also serves as Director of Surgen, Inc. and serves
as a Trustee of the Mainstay Mutual Funds Group. Previously, Mr. Nickelson was a
Chairman of the Board of Greenfield Industries and the Pacific Stock Exchange,
in addition to serving on many other Boards which included Allied Healthcare
Products, Inc. and DT Industries.
EXECUTIVE OFFICERS OF THE COMPANY
The Company's Executive Officers are elected annually by the Company's
Board of Directors. Certain information regarding the Company's Executive
Officers who are not Directors of the Company is set forth below.
<PAGE>
Claude Fernandez, age 45, Executive Vice President--Financial Operations,
is a Managing Director, Executive Vice President and Chief Administrative
Officer of W. P. Carey & Co. Mr. Fernandez joined W. P. Carey & Co. as Assistant
Controller in March 1983, was elected Controller in July 1983, a Vice President
in April 1986, a First Vice President in April 1987, a Senior Vice President in
April 1989 and Executive Vice President in April 1991. Prior to joining W. P.
Carey & Co., Mr. Fernandez was associated with Coldwell Banker, Inc. in New York
for two years and with Arthur Andersen & Co. in New York for over three years.
Mr. Fernandez, a Certified Public Accountant, received a B.S. in Accounting from
New York University in 1975 and an M.B.A. in Finance from Columbia University
Graduate School of Business in 1981.
John J. Park, age 33, Executive Vice President, Chief Financial Officer and
Treasurer, is a Senior Vice President, Treasurer and a Managing Director of W.
P. Carey & Co. Mr. Park became a First Vice President of W. P. Carey & Co. in
April 1993 and a Senior Vice President in October 1995. Mr. Park joined W. P.
Carey & Co. as an Investment Analyst in December 1987 and became a Vice
President in July 1991. Mr. Park received a B.S. in Chemistry from Massachusetts
Institute of Technology in 1986 and an M.B.A. in Finance from the Stern School
of New York University in 1991.
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<PAGE>
H. Augustus Carey, age 40, Senior Vice President and Secretary, is a Senior
Vice President, Secretary and a Managing Director at W. P. Carey & Co. He
returned to W. P. Carey & Co. as a Vice President in August 1988 and was elected
a First Vice President in April 1992. Mr. Carey previously worked for W. P.
Carey & Co. from 1979 to 1981 as Assistant to the President. From 1984 to 1987,
Mr. Carey served as a loan officer in the North American Department of Kleinwort
Benson Limited in London, England. He received his A.B. in Asian Studies from
Amherst College in 1979 and a M.Phil. in Management Studies from Oxford
University in 1984. He is the son of Francis J. Carey and the nephew of William
P. Carey.
Edward V. LaPuma, age 25, First Vice President--Acquisitions, is a First
Vice President and Research Officer for W. P. Carey & Co. and its Affiliate,
CIP(TM). Mr. LaPuma joined W. P. Carey & Co. as an Assistant to the Chairman in
July 1995, became a Second Vice President in July 1996, a Vice President in
April 1997 and First Vice President in April 1998. A graduate of the University
of Pennsylvania, Mr. LaPuma received a B.A. in Global Economics Strategies from
The College of Arts and Sciences and a B.S. in Economics with a concentration in
Finance from the Wharton School.
Samantha K. Garbus, age 30, Vice President--Asset Management, is a Vice
President and a Director of Property Management of W. P. Carey & Co. Ms. Garbus
became a Second Vice President of W. P. Carey & Co. in April 1995 and a Vice
President in April 1997. Ms. Garbus joined W. P. Carey & Co. as a Property
Management Associate in January 1992. Ms. Garbus received a B.A. in History from
Brown University in 1990 and an M.B.A. from the Stern School of New York
University in January 1997.
Susan C. Hyde, age 29, Vice President--Shareholder Services, is a Vice
President and a Director of Investor Relations of W. P. Carey & Co. Ms. Hyde
joined W. P. Carey & Co. in 1990, became a Second Vice President in April 1995
and a Vice President in April 1997. Ms. Hyde graduated from Villanova University
in 1990 where she received a B.S. in Business Administration with a
concentration in marketing and a B.A. in English.
Robert C. Kehoe, age 37, Vice President--Accounting, a Vice President of W.
P. Carey & Co., joined W. P. Carey & Co. as a Senior Accountant in 1987. Mr.
Kehoe became a Second Vice President of W. P. Carey & Co. in April 1992 and a
Vice President in July 1997. Prior to joining W. P. Carey & Co., Mr. Kehoe was
associated with Deloitte Haskins & Sells for three years and was Manager of
Financial Controls at CBS Educational and Professional Publishing for two years.
Mr. Kehoe received his B.S. in Accounting from Manhattan College in 1982 and his
M.B.A. from Pace University in 1993.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Shares as of the April 15, 1998 by (i) each of the Directors; (ii)
the Chief Executive Officer of the Company; and (iii) all Directors and
executive officers of the Company as a group. The business address of the
individuals listed is 50 Rockefeller Plaza, New York, NY 10020.
<PAGE>
<TABLE>
<CAPTION>
Amount of Shares
Beneficially Percentage
Name Owned (1) of Class
---- --------- --------
<S> <C> <C>
Francis J. Carey 15,368 *
Steven M. Berzin (2) 28,113 *
Gordon F. DuGan (3) 5,300 *
William P. Carey (4) 797,928 3.28
Eberhard Faber, IV (5) 7,013 *
Barclay G. Jones, III (6) 31,344 *
Lawrence R. Klein 2,026 *
Donald E. Nickelson (7) 8,821 *
Charles C. Townsend 3,026 *
Reginald Winssinger 2,026 *
All Executive Officers and Directors
as a Group (14 persons) 928,810 3.82
</TABLE>
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* Less than one percent.
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<PAGE>
(1) Beneficial ownership has been determined in accordance with the rules of the
Securities and Exchange Commission. Except as noted, and except for any
community property interests owned by spouses, the listed individuals have
sole investment power and sole voting power as to all Shares which they are
identified as being the beneficial owners.
(2) 17,500 of these Shares are held pursuant to a compensation arrangement with
Carey Management LLC (the "Manager") and are subject to the restrictions
connected therewith.
(3) 5,000 of these Shares are held pursuant to a compensation arrangement with
the Manager and are subject to the restrictions connected therewith.
(4) Includes 610,363 Shares held by the Manager which Mr. Carey is deemed to be
the beneficial owner of as a result of his indirect ownership of Carey
Management LLC through W. P. Carey & Co., Inc., Carey Corporate Property,
Inc., Seventh Carey Corporate Property, Inc., Eighth Carey Corporate
Property, Inc. and Ninth Carey Corporate Property, Inc., the shareholders of
Carey Management LLC. Also includes 66,300 Shares held by W. P. Carey & Co.,
Inc., 17,171 Shares held by Carey Corporate Property, Inc., 5,539 Shares
held by Seventh Carey Corporate Property, Inc., 6,955 Shares held by Eighth
Carey Corporate Property, Inc., and 5,263 Shares held by Ninth Carey
Corporate Property, Inc. for which Mr. Carey is deemed to be the beneficial
owner. See "Certain Transactions." Officers of Carey Management LLC who are
not officers of the Company own an additional 23,000 Shares.
(5) Includes 3,175 Shares held by trusts of which Mr. Faber is a trustee and a
beneficiary.
(6) 12,500 of these Shares are held pursuant to a compensation arrangement with
the Manager and are subject to the restrictions connected therewith.
(7) Includes 388 Shares held by Mr. Nickelson's wife.
COMMITTEES OF THE BOARD OF DIRECTORS
Members of the Company's Board of Directors have been appointed to serve on
various committees of the Board of Directors. The Board of Directors has
currently established three committees: (i) the Executive Committee; (ii) the
Compensation Committee; and (iii) the Audit Committee.
Executive Committee. The Executive Committee may authorize the execution of
contracts and agreements, including those related to the borrowing of money by
the Company. The Executive Committee will exercise, during intervals between
meetings of the Board of Directors and subject to certain limitations, all of
the powers of the full Board of Directors and will monitor and advise the Board
of Directors on strategic business planning for the Company. The Executive
Committee consists of Messrs. William Carey (Chairman), Francis Carey and DuGan.
No Executive Committee meetings have been held to date.
Compensation Committee. The Compensation Committee is responsible for
assuring that the officer and key management personnel of the Company are
effectively compensated in terms of salaries, supplemental compensation and
benefits which are internally equitable and externally competitive. The
Compensation Committee will review annually the compensation and allowances for
directors as recommended by Company management, review and approve distribution
of incentive compensation or bonuses and the design of any new supplemental
<PAGE>
compensation program and, upon recommendation of company management, review and
approve the number of Shares, price per share, and period of duration for stock
grants under any approved share incentive plan. The members of the Compensation
Committee are Messrs. Townsend (Chairman), Faber and Nickelson. No Compensation
Committee meetings have been held to date.
Audit Committee. The Audit Committee has been established to make
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the plans and results of the
audit engagement, approve professional services provided by the independent
public accountants, review the independence of the independent public
accountants, consider the range of audit and non-audit fees and review the
adequacy of the Company's internal accounting controls. Messrs. Nickelson
(Chairman), Winssinger and Faber serve on the Audit Committee. One Audit
Committee meeting has been held in 1998 through March 31, 1998.
The Board of Directors does not have a standing nominating committee.
COMPENSATION OF THE BOARD OF DIRECTORS
The Company pays its Directors who are not officers of the Company fees for
their services as Directors. Such Directors receive annual compensation of
$35,000, currently consisting of $4,000 ($1,000 for each quarterly meeting) in
cash and $31,000 in the form of restricted Shares. In addition, Mr. Nickelson
receives additional compensation in the amount of $10,000 in the form of
restricted Shares for serving as Chairman of the Company's Audit Committee. This
compensation may be changed by the Board of Directors. Officers or employees of
the Company or Manager who are Directors are not paid any director fees.
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<PAGE>
Pursuant to the Company's Non-Employee Directors' Plan, each independent
Director who was a member of the Board of Directors on the first day of trading
of the Shares (January 21, 1998) was granted an option to purchase 4,000 Shares
at an exercise price of $20 per Share and 1,250 restricted Shares. The exercise
price of options granted under the Non-Employee Directors' Plan may be paid in
cash, acceptable cash equivalents, Shares or a combination thereof. Options
issued under the Non-Employee Directors' Plan are exercisable for ten years
beginning one year from the date of grant.
The options granted under the Non-Employee Directors' Plan become
exercisable as follows: 1,333 Shares on each of the first and second
anniversaries of the date of grant and 1,334 Shares on the third anniversary of
the date of grant provided that the Director is a member of the Board of
Directors on such anniversary date or has not voluntarily retired from the
Board.
The Non-Employee Directors' Plan authorizes the issuance of up to 300,000
Shares. In addition to the initial grant, in subsequent annual periods, each
independent Director is eligible to receive quarterly an award of options to
purchase Shares or restricted Shares. Awards may be made on each April 1, July
1, October 1 and January 1 (each date, a "Quarterly Award Date") during the term
of the Non-Employee Directors' Plan. As part of the compensation described
above, each Independent Director may receive in lieu of restricted Shares, on
each Quarterly Award Date on which he is a member of the Board of Directors, the
number of options to purchase Shares or restricted Shares having a fair market
value on that date that as nearly as possible equals, but does not exceed
$6,250.
EXECUTIVE COMPENSATION
The Company was organized as a Delaware limited liability company in
October 1996. On January 1, 1998, the Company completed its merger with nine
CPA(R) Partnerships. During 1996 and 1997 the Company had no employees and paid
no compensation to any executive officer. The Company currently has one
employee. The following table sets forth the base compensation to be awarded to
Francis J. Carey, the Company's Chief Executive Officer, during 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------- ----------------------
Restricted Stock Securities Underlying
Salary (1) Awards ($) (2) Options (#) (3)
---------- -------------- ---------------
<S> <C> <C> <C>
Francis J. Carey $250,000 150,937.50 113,500
Chairman & Chief
Executive Officer
</TABLE>
- -----------
(1) Amount specified does not include bonuses or other annual compensation not
reportable as Salary that may be paid.
(2) On January 1, 1998, Mr. Carey received a grant of 7, 500 Shares as part of
his annual compensation. On January 1, 1998, the Shares were not publicly
traded. On March 31, 1998 the closing price of the Company's Shares as
listed on the New York Stock Exchange was $20.125. The transferability of
these Shares is restricted.
<PAGE>
(3) On January 1, 1998, Mr. Carey received options to purchase 38,500 Shares at
$20 per Share. Mr. Carey also received a one-time grant of options to
purchase 75,000 Shares at $20 per Share.
<TABLE>
<CAPTION>
OPTION GRANT IN FISCAL YEAR 1998
Percent of
Total Potential Realizable
Options Value at Assumed
Granted to Annual Rate of Share
Employees Price Appreciation
Options in Fiscal Exercise Price Expiration
Granted (1) Year per Share Date 5% 10%
----------- ---- --------- ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Francis J. Carey 113,500 100% $20 1/08 $1,427,590 $3,617,795
</TABLE>
- ---------
(1) The options will become exercisable for one-third of the covered Shares on
each of January, 1999, January, 2000 and January, 2001.
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<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company has recently established a Compensation Committee. The
Compensation Committee has the responsibility to monitor and implement the
compensation program for the Company's executive officers and key management
personnel. For 1998, the base salary of the Company's Chief Executive Officer
was established by the Board of Directors prior to the completion of the
Company's merger with the nine CPA(R) Partnerships. The Compensation Committee
will meet during 1998 to determine the annual compensation, including any
bonuses to be paid to the Company's Chief Executive Officer during 1998 and his
1999 compensation.
PERFORMANCE GRAPH
For companies with securities registered under the Securities Exchange Act
of 1934, Securities and Exchange Commission regulations require the presentation
of a performance graph comparing the yearly percentage change in the Company's
cumulative total shareholder return on its securities to the cumulative total
return of a broad equity market index and of a peer group of issuers for the
past five years. No performance graph is required to be presented for the
Company's Shares since the Company first became subject to such requirements in
1998.
CERTAIN TRANSACTIONS
Management Contract with Carey Management LLC
Carey Management LLC, the Manager of the Company, provides both strategic
and day-to-day management services for the Company including acquisition
services, research, investment analysis, asset management, capital funding
services, disposition of assets and administrative services for which it
receives a fee from the Company. W. P. Carey & Co., a company which is owned
solely by William P. Carey, a director of the Company, and its affiliates (Carey
Corporate Property, Inc., Seventh Carey Corporate Property, Inc., Eighth Carey
Corporate Property, Inc., and Ninth Carey Corporate Property, Inc.) own 100% of
Carey Management, LLC.
Amounts Payable to the Manager
Amounts Payable by the Company.
The following is a description of the fees payable by the Company to the
Manager in connection with the services provided by the Manager.
Management Fee and Performance Fee. The Manager is paid a monthly
Management Fee at an annual rate of .5 percent of the Total Capitalization of
the Company and a monthly Performance Fee at an annual rate of .5 percent of the
Total Capitalization of the Company. The Performance Fee is paid in the form of
restricted Shares which vest ratably over five years. The Total Capitalization
of the Company is measured each month by adding (i) the average of total
principal amount of the debt owed by the Company (measured as of the first and
last day of each month) and (ii) the Average Market Capitalization of the
Company (measured by multiplying the closing price of the Shares on each trading
day of the month by the total number of Shares issued in connection with the
merger of the Company with the nine CPA(R) Partnerships (the "Consolidation")
outstanding each trading day, adding the product for each day and dividing the
sum by the number of trading days in the month).
<PAGE>
Before the Shares are vested, the restricted Shares are not transferable
and are subject to forfeiture in the event the Manager is terminated for cause
or resigns. The restricted Shares vest immediately in the event of a change of
control and certain other circumstances. The Management Fee and Performance Fee
is each reduced by one-half of the amount received by the Manager from the
Subsidiary Partnerships for property management or leasing fees and
distributions of Cash from Operations from the Subsidiary Partnerships. The sale
of the Shares is restricted pursuant to Rule 144 of the Securities Act of 1933,
as amended. The fee amount is divided by the closing price of the Shares on the
last trading day of the month to determine the number of Shares to be paid to
the Manager.
Termination Fee. If the Management Agreement is terminated in connection
with a change of control, by the Company without cause or by the Manager with
Good Reason, the Manager is entitled to receive a Termination Fee. The
Termination Fee equals the sum of (A) any fees that would be earned by the
Manager upon the disposition of the assets of the Company and the Subsidiary
Partnerships at their appraised value as of the date the Management Agreement is
terminated (the "Termination Date") and (B)(1) if the agreement is terminated by
the Company after a
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<PAGE>
change in control, $50 million if the change in control occurs on or before
December 31, 1998 and thereafter, five times the total fees paid to the Manager
by the Company and the Subsidiary Partnerships in the 12 months preceding the
change in control and (2) if the agreement is terminated without cause or for
Good Reason, $50 million if the agreement is terminated before December 31,
1999; $40 million if the agreement is terminated before December 31, 2000; $30
million if the agreement is terminated before December 31, 2001; $20 million if
the agreement is terminated before December 31, 2002 and $10 million if the
agreement is terminated before December 31, 2003.
The Manager may also be paid fees on a transactional basis for
acquisitions, dispositions and other similar transactions. The terms of such
fees will be negotiated with the Board of Directors.
Amounts Payable by the Subsidiary Partnerships.
The Manager is entitled to the distributions from the respective Subsidiary
Partnerships described below. Distributions paid to the Manager by the
Subsidiary Partnerships described in the following table reduce the management
fee and performance fee otherwise payable to the Manager by the Company each by
one-half of the amount paid by the Subsidiary Partnership:
<TABLE>
<CAPTION>
Subsidiary Percentage of Distributions
Partnership Property Management/ Leasing Fee of Cash from Operations
----------- -------------------------------- -----------------------
<S> <C> <C>
CPA(R):1 5% of Adjusted Cash from Operations 1%
CPA(R):2 5% of Adjusted Cash from Operations 1%
CPA(R):3 5% of Adjusted Cash from Operations 2%
CPA(R):4 1% of gross lease payments(1) 6%
CPA(R):5 1% of gross lease payments(1) 6%
CPA(R):6 1% of gross lease payments(1) 6%
CPA(R):7 1% of gross lease payments(1) 6%
CPA(R):8 3% of gross lease payments over first
five years of original term of each lease 10%
CPA(R):9 3% of gross lease payments over first
five years of original term of each lease. 10%
</TABLE>
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(1) The management fee for properties not subject to leases with an initial term
of less than 10 years is (i) six percent of the gross revenues of such leases
where such Affiliate performs leasing, re-leasing and leasing related services,
or (ii) three percent of gross revenues of such leases where such services are
not performed; provided, however, that in no event shall such management fee
exceed an amount which is competitive for similar services in the same
geographic area and further provided that bookkeeping services and fees paid to
non-Affiliates for management services shall be included in the management fee.
<PAGE>
Incentive Fee. The Manager is entitled to be paid an Incentive Fee equal to
15 percent of the amount of the net proceeds received from the sale of a
property previously held by a CPA(R) Partnership in excess of the appraised
value of the equity interest in such property used in the Consolidation less an
adjustment for the share of such net proceeds in excess of the appraised value
of the equity interest attributable to the Manager's interest in the Shares.
Amounts Paid to W. P. Carey & Co.
Upon completion of the merger of the nine CPA(R) Partnerships, W. P. Carey
& Co. received warrants to purchase 2,284,800 Shares at $21 per Share and
725,930 Shares at $23 per Share as compensation for investment banking services
provided to the Company. The warrants are exercisable for a ten year period
beginning January 1, 1999.
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<PAGE>
Amounts Paid/Payable to the General Partners
In connection with the merger of the nine CPA(R) Partnerships, W. P. Carey
& Co. and Affiliates (collectively, the "General Partners") received a
subordinated preferred return of $5,111,000, measured based upon the cumulative
proceeds arising from the sale of the CPA(R) Partnerships assets (with the
exception of CPA(R):5). Carey Management is entitled to be paid a Preferred
Return in connection with CPA(R):5 of $1,067,133 if the closing price of the
Shares exceeds $23.11 for five consecutive days.
Livho, Inc. Transaction
In connection with the Consolidation, the Company obtained a hotel in
Livonia, Michigan which was not subject to a lease. The Company would be taxed
as a corporation if it received more than a small percentage of its income from
the operation of a hotel. In order to avoid taxation as a corporation, the
Company leased the hotel to Livho Inc., a corporation wholly-owned by Francis J.
Carey, the chairman and chief executive officer of the Company pursuant to a
10-year lease. Livho Inc. pays the Company a rent of $2,347,607 for 1998.
SHAREHOLDER PROPOSALS
Any proposal which a Shareholder intends to present at the Company's 1999
Annual Meeting of Shareholders must be received by the Company no later than
December 15, 1998 in order to be included in the Company's Proxy Statement and
form of proxy relating to that meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has engaged the firm of Coopers & Lybrand as its independent
public accountants, and the Board of Directors has selected Coopers & Lybrand as
auditors for 1998.
A representative of Coopers & Lybrand will be present at the Annual
Meeting, will be given the opportunity to make any statement he desires to make
and will be available to respond to questions.
OTHER MATTERS
The Board of Directors does not know of other matters which are likely to
be brought before the meeting. However, in the event that any other matters
properly come before the Annual Meeting, the persons named in the enclosed proxy
are expected to vote the Shares represented by such proxy on such matters in
accordance with their best judgment.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Meeting and the enclosed proxy is to be borne by the Company.
<PAGE>
In addition to the solicitation of proxies by the use of the mails, the
Company may utilize some of the officers and employees of the Manager (who will
receive no compensation in addition to their regular salaries) to solicit
proxies personally and by telephone. The Company does not currently intend to
retain a solicitation firm to assist in the distribution of proxy statements and
the solicitation of proxies, but if sufficient proxies are not returned to the
Company it may retain an outside firm to assist in proxy solicitation for a fee
estimated not to exceed $7,500 plus out of pocket expenses. The Company may
request banks, brokers and other custodians, nominees and fiduciaries to forward
copies of the Proxy Statement to their principals and to request authority for
the execution of proxies, and will reimburse such persons for their expenses in
so doing.
By order of the Board of Directors
/s/H. Augustus Carey
--------------------
H. Augustus Carey
Secretary
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